“Kvirikashvili Effect”: Confidence returns to Georgia’s business sector
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The optimism and confidence of Georgian business leaders is growing following the new approach of Georgia’s recently-appointed Prime Minister, who is actively reforming the business climate and improving the investment environment in Georgia.
A report by the International School of Economics (ISET) of Ivane Javakhishvili Tbilisi State University (TSU) in Georgia showed confidence within Georgia’s business society had grown in the first few months of 2016.
Specifically, the Georgian Business Confidence Index (BCI) gained three points on a -100/100 scale but the reasons for this was unclear.
The expectations of the private sector in Georgia improved and reached 38 index points. This is an improvement from 16 points in the fourth quarter of 2015,” read the report.
This was a "sudden and unexplained improvement” reported ISET.
The research authors explained business confidence started to increase after Giorgi Kvirikashvili became Prime Minister of Georgia at the end of 2015. For this reason ISET called the BCI increase the "Kvirikashvili Effect”.
The first months of Kvirikashvili’s term as Georgia’s PM were marked by a large number of pro-business initiatives targeting the Georgian tax code and tax administration. The Georgian Government is developing proposals for very significant changes in a corporate taxation, abolition of VAT on imported capital goods, improvements in tax administration and insolvency regulation,” read the report.
ISET reported Kvirikashvili was prioritising business-related problems, which raised enthusiasm in the business society.
Since taking over as Prime Minister, Kvirikashvili actively discussed and reformed the Estonian corporate tax system reform, deferral of VAT payment on imported capital goods, simplified tax administration resolved insolvency issues and more.
ISET said the most limiting factor for doing business in Georgia was insufficient demand, which was the main challenge the Georgian business society faced today.
SMEs typically have more trouble attracting financial resources than larger companies,” read the report.
Despite this ISET said business confidence in the first quarter of 2016 slightly improved for large businesses and declined for SMEs. Overall the trend for large companies as well as SMEs was stable and positive, noted the report.
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